XML 61 R30.htm IDEA: XBRL DOCUMENT v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Bancorp and its subsidiaries file a consolidated federal income tax return. The following is a summary of applicable income taxes included in the Consolidated Statements of Income for the years ended December 31:
($ in millions)202120202019
Current income tax expense:
U.S. Federal income taxes$657 463 788 
State and local income taxes102 69 148 
Foreign income taxes2 — — 
Total current income tax expense761 532 936 
Deferred income tax (benefit) expense:
U.S. Federal income taxes(21)(140)(212)
State and local income taxes8 (23)(35)
Foreign income taxes(1)1 1 
Total deferred income tax benefit(14)(162)(246)
Applicable income tax expense$747 370 690 

The current U.S. Federal income taxes above include proportional amortization for qualifying LIHTC investments of $163 million, $150 million and $140 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The following is a reconciliation between the statutory U.S. Federal income tax rate and the Bancorp’s effective tax rate for the years ended December 31:
202120202019
Statutory tax rate21.0 %21.0 21.0 
Increase (decrease) resulting from:
State taxes, net of federal benefit2.5 2.0 2.8 
Tax-exempt income(0.6)(1.5)(1.2)
LIHTC investment and other tax benefits(5.5)(9.7)(5.0)
LIHTC investment proportional amortization4.6 8.3 4.4 
Other tax credits(0.2)(0.4)(0.2)
Other, net(0.6)0.9 (0.2)
Effective tax rate21.2 %20.6 21.6 

Other tax credits in the rate reconciliation table include New Markets, Rehabilitation Investment and Qualified Zone Academy Bond tax credits. Tax-exempt income in the rate reconciliation table includes interest on municipal bonds, interest on tax-exempt lending, income on life insurance policies held by the Bancorp and certain gains on sales of leases that are exempt from federal taxation.

The following table provides a reconciliation of the beginning and ending amounts of the Bancorp’s unrecognized tax benefits:
($ in millions)202120202019
Unrecognized tax benefits at January 1$100 65 55 
Gross increases for tax positions taken during prior period10 29 25 
Gross decreases for tax positions taken during prior period(4)(3)(3)
Gross increases for tax positions taken during current period11 12 6 
Settlements with taxing authorities— (1)(9)
Lapse of applicable statute of limitations(15)(2)(9)
Unrecognized tax benefits at December 31(a)
$102 100 65 
(a)With the exception of $6 in 2020 and 2019, all amounts represent unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.

The Bancorp’s unrecognized tax benefits as of December 31, 2021, 2020 and 2019 primarily related to state income tax exposures from taking tax positions where the Bancorp believes it is likely that, upon examination, a state would take a position contrary to the position taken by the Bancorp.

While it is reasonably possible that the amount of the unrecognized tax benefits with respect to certain of the Bancorp’s uncertain tax positions could increase or decrease during the next twelve months, the Bancorp believes it is unlikely that its unrecognized tax benefits will change by a material amount during the next twelve months.
Deferred income taxes are comprised of the following items at December 31:
($ in millions)20212020
Deferred tax assets:
Allowance for loan and lease losses$397 $515 
Deferred compensation106 107 
Reserve for unfunded commitments38 36 
Reserves30 40 
State net operating loss carryforwards3 3 
State deferred taxes— 1 
Other202 160 
Total deferred tax assets$776 $862 
Deferred tax liabilities:
Lease financing$553 $638 
Other comprehensive income367 779 
MSRs and related economic hedges116 120 
Goodwill and intangible assets68 62 
Bank premises and equipment65 91 
Investments in joint ventures and partnership interests61 58 
State deferred taxes6 — 
Other51 66 
Total deferred tax liabilities$1,287 $1,814 
Total net deferred tax liability$(511)$(952)

At both December 31, 2021 and 2020, the Bancorp recorded deferred tax assets of $3 million related to state net operating loss carryforwards. The deferred tax assets relating to state net operating losses are presented net of specific valuation allowances of $4 million at both December 31, 2021 and 2020. If these carryforwards are not utilized, they will expire in varying amounts through 2041.

The Bancorp has determined that a valuation allowance is not needed against the remaining deferred tax assets as of December 31, 2021 or 2020. The Bancorp considered all of the positive and negative evidence available to determine whether it is more likely than not that the deferred tax assets will ultimately be realized and, based upon that evidence, the Bancorp believes it is more likely than not that the deferred tax assets recorded at December 31, 2021 and 2020 will ultimately be realized. The Bancorp reached this conclusion as it is expected that the Bancorp’s remaining deferred tax assets will be realized through the reversal of its existing taxable temporary differences and its projected future taxable income.

The IRS is currently examining the Bancorp’s 2019 federal income tax return. The statute of limitations for the Bancorp’s federal income tax returns remains open for tax years 2018 through 2021. In addition, the statute of limitations remains open for an acquired entity’s federal income tax returns for tax years 2017 through 2019. On occasion, as various state and local taxing jurisdictions examine the returns of the Bancorp and its subsidiaries, the Bancorp may agree to extend the statute of limitations for a reasonable period of time. Otherwise, the statutes of limitations for state income tax returns remain open only for tax years in accordance with each state’s statutes.

Any interest and penalties incurred in connection with income taxes are recorded as a component of applicable income tax expense in the Consolidated Financial Statements. During the years ended December 31, 2021, 2020 and 2019, the Bancorp recognized $1 million, $3 million and $1 million, respectively, of interest expense in connection with income taxes. At both December 31, 2021 and 2020, the Bancorp had accrued interest liabilities, net of the related tax benefits, of $7 million. No material liabilities were recorded for penalties related to income taxes.
Retained earnings at both December 31, 2021 and 2020 included $157 million in allocations of earnings for bad debt deductions of former thrift subsidiaries for which no income tax has been provided. Under current tax law, if certain of the Bancorp’s subsidiaries use these bad debt reserves for purposes other than to absorb bad debt losses, they will be subject to federal income tax at the current corporate tax rate.